High and unlikely: marijuana brands lack federal protection

Experts discuss the brand challenges facing the legal marijuana market in the US

Marijuana has long been prohibited in the US at the federal level, but in certain states, the substance is now legal to use, either entirely or for medical purposes. With this liberalisation of state drugs laws, a highly lucrative market is forming.

According to ArcView Market Research’s third The State of Legal Marijuana Markets, total (medical and recreational) retail sales of cannabis hit $2.7 billion in the US in 2014, while medical use sales reached $1.2 billion. The marijuana market is a lucrative sector and manufacturers and growers have, along with pharma, expressed an interest in protecting their brands through trademarks. But federal US law is currently making that difficult.

Marijuana is listed under the US Controlled Substances Act (CSA), making the registration of related federal trademarks all but impossible. Todd Blakely, partner at Sheridan Ross, explains that federal trademarks are “not available in the US for marijuana or products containing marijuana—applications for those types of goods will be rejected”.

“The US Patent and Trademark Office (USPTO) will not grant trademarks on marijuana products, even though certain states are starting to legalise it for recreational purposes.”

The USPTO Trademark Manual of Examining Procedure Section 907 explains that the use of a mark must be “lawful” to be “the basis for federal registration of the mark”.

It continues: “Generally, the USPTO presumes that an applicant’s use of the mark in commerce is lawful and does not inquire whether such use is lawful unless the record or other evidence shows a clear violation of law, such as the sale or transportation of a controlled substance.”

It also states: “[R]egardless of state law, the federal law provides no exception to the above-referenced provisions for marijuana for ‘medical use.’”

Under Section 907, US trademark applications with a filing basis of use in commerce that cover the sale or transportation of marijuana will be refused registration on the basis that the applicant’s use in commerce of the mark is illegal.

Blakely adds that while a federal trademark registration can be helpful in protecting the rights of a product, “it is not a requirement to acquiring, possessing and enforcing trademark rights”.

He explains: “The Lanham Act allows for owners of common law or unregistered trademarks to sue for infringement in federal courts. However, this basis is not available if the trademark owner’s use in commerce of the mark is not lawful under federal law. As a result, policing of trademarks that cover the sale or distribution of marijuana would be limited to lawsuits filed in state court based upon state trademark rights.”

Due to the state-by-state nature of the legal marijuana market, Blakely says trademark rights around marijuana differ across states, so market participants have to piece together different types of protections, “to protect both their brands and the product”.
One area of difficulty for market participants is the transportation of products, which Jim Nelson, partner at Schwegman, Lundberg & Woessner IP, says is “near impossible” at present because there is no legal interstate commerce for marijuana products. Participants are restricted to selling their marijuana products in one state, even if it is legal in a neighbouring state.

Maureen Carlson, partner at Thompson Hall, adds: “Companies that hold manufacturing licences in more than one state have expressed concerns with commercialisation and sale of marijuana projects without trademark protection.”

Only if the federal prohibition is lifted will marijuana market participants be able to register marks at the federal level, she adds.

As the legal marijuana market evolves in the US, the pharma sector could be the one to profit in the long-run, due to health concerns.

Nelson says: “Smoking marijuana, instead of cigarettes, still creates the inhalation of tars and toxins and the threat of cancer would still be a problem.”

“Pharma companies will likely produce an extract, ie, THC (tetrahydrocannabinol) and CBD (cannabidiol) that can be taken orally and/or inhaled as a vapour.”

“This will negate the tars and toxins aspect of smoking. So if legalised, pharma companies would be expected to capture a significant share of the market. Marijuana would be turned into a pill or inhaler, in a controlled and regulated manner.” 

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